What is the effect on net working capital if the corporation decides to increase their investment in inventory and pay for it with cash?
A) increase in NWC.
B) decrease in NWC.
C) depends on the amount of the investment.
D) no effect.
E) depends on the amount of cash.

Question

Quizplus · Accepted Answer

Net working capital is calculated as current assets minus current liabilities. Increasing inventory (a current asset) and paying with cash (another current asset) results in no net change in current assets, thus no effect on net working capital.

What Is the Effect on Net Working Capital If the Corporation